An RBI survey has indicated that consumer confidence was not only negative for three of the five parameters in July but was expected to deteriorate further compared to two months ago. A year down the line, however, they expect the sentiment to improve a bit. Consumers’ perceptions on the general economic situation and the employment scenario softened, while their assessment of their own incomes turned out to be less optimistic than in May 2019. RBI’s latest consumer confidence survey showed that respondents perceived a rise in the price level and the majority expect prices to rise during the year ahead. While this boosted sentiments on overall spending, they were less optimistic about discretionary spending, which may reflect in a demand slowdown for consumer durables and automobiles.
Already, some of these sectors have been hit by lower consumer spend, partly due to difficulty in accessing loans from NBFCs, many of which are going through a rough patch.
A weak consumer sentiment is also reflecting in the business sentiment, with respondents being less upbeat about production order book and capacity utilisation during the second quarter.